$3.8 tril budget heads to Congress

Obama's spending plan includes $100 bil for jobs

WASHINGTON - President Barack Obama's proposed budget predicts the national deficit will crest at a record-breaking almost $1.6 trillion in the current fiscal year, then start to recede in 2011 to just below $1.3 trillion.

Still, the administration's new budget, to be released today, says deficits over the next decade will average 4.5 percent of the size of the economy, a level that economists say is dangerously high if not addressed.

A congressional official provided the information, which comes from a White House summary document. The official spoke on condition of anonymity because the spending proposal is not supposed to be made public until today.

Details of the administration's budget headed for Congress include an additional $100 billion to attack painfully high unemployment. The proposed $3.8 trillion budget would provide billions more to pull the country out of the Great Recession while increasing taxes on the wealthy and imposing a spending freeze on many government programs.

Administration projections show the deficit never dropping below $700 billion.

White House spokesman Robert Gibbs said the administration believed "somewhere in the $100 billion range" would be the appropriate amount for a new jobs measure made up of a business tax credit to encourage hiring, increased infrastructure spending and money from the government's bailout fund to get banks to increase loans to small businesses.

Congressional sources said Obama's new budget will propose extending the Making Work Pay middle-class tax breaks of $400 per individual and $800 per couple through 2011. They were due to expire after this year.

The budget will also propose $250 payments to Social Security recipients and a $25 billion increase in payments to help recession-battered states.

In a bow to worries over the soaring deficits, Obama is proposing a three-year freeze on spending for a wide swath of domestic government agencies. Military, veterans, homeland-security and big benefit programs such as Medicare would not feel the pinch. The freeze is designed to save $250 billion over a decade.

Obama's budget repeats his recommendations for an overhaul of the nation's health-care system. It proposes to get billions of dollars in savings from the Medicare program and again seeks increased taxes on the wealthy by limiting the benefits they receive from various tax deductions. Both ideas have met strong resistance in Congress.

Obama is proposing to boost revenues by allowing the Bush era tax cuts of 2001 and 2003 to expire at year-end for families making more than $250,000 a year.

The budget will also include a proposal to levy a fee on the nation's biggest banks to raise about $90 billion to recover losses from the financial-rescue fund.

Obama also endorsed a pay-as-you-go proposal that would require any new tax cuts or entitlement spending increases to be paid for.